What do you guys think -- is it "worth" trying to time the market for tax loss harvesting? Obviously things can (and likely will) keep going down, but it seems like this would be a good time to lock in some losses for the year ... thoughts?

Even if the funds aren't that similar, you'll still be in the market. And the performances are likely to be very correlated (unless it's replacing the S&P500 with Emerging Markets).

My market timing question was how long to wait to harvest the losses. I could realize the losses on the next fund too if it keeps going down, but at some point things will start going up again and I want to max the losses. It's a guessing game.

Thanks, all! I'm new to TLH and didn't recognize (duh!) the idea of just immediately buying something similar-but-slightly different. Snuck in with perfect luck on this one for a $1200 loss and am already back above where I started.

What tools/references are you guys using to find funds that are not "like-kind" but that are pretty much the same yet track different indices?

This is hard because the IRS has issued very little guidance about how similar funds can get before they become "substantially identical." That said, I think you would be relatively safe by looking at the list of which funds the robo-advisors switch back and forth between in a given asset class.

This seems like a pretty open topic thread for TLH questions... hope I'm not hijacking.

Is it smart to TLH during accumulation?

I've bought 16000 worth VTIAX/VTSMX this year, and its basically down 2k. Based on our incomes/taxes, I think this would save us $300 in taxes this year. Would it be smart to TLH?

Can I sell VTIAX and VTSMX and buy VFINX?

By selling, you realize the loss, and you invest your cost basis in another fund, if the market then returns (say in 30 days), aren't you going to realize a gain to sell and buy back into your asset allocation?

What tools/references are you guys using to find funds that are not "like-kind" but that are pretty much the same yet track different indices?

This is hard because the IRS has issued very little guidance about how similar funds can get before they become "substantially identical." That said, I think you would be relatively safe by looking at the list of which funds the robo-advisors switch back and forth between in a given asset class.

Thanks! So where would I get a list of the funds that robo-advisors trade? Do I basically just need to sign up for a service and put some money in, then just manually 'mirror' what they're doing?

What tools/references are you guys using to find funds that are not "like-kind" but that are pretty much the same yet track different indices?

This is hard because the IRS has issued very little guidance about how similar funds can get before they become "substantially identical." That said, I think you would be relatively safe by looking at the list of which funds the robo-advisors switch back and forth between in a given asset class.

Thanks! So where would I get a list of the funds that robo-advisors trade? Do I basically just need to sign up for a service and put some money in, then just manually 'mirror' what they're doing?

By selling, you realize the loss, and you invest your cost basis in another fund, if the market then returns (say in 30 days), aren't you going to realize a gain to sell and buy back into your asset allocation?

By immediately buying something substantially similar (but not the same by IRS standards!), the idea is that you keep generally the same allocation and so you don't ever "sell and buy back into your asset allocation." The next time you sell is when you can take another loss. Then you can go back to the funds you started with, but they should be similar enough that it doesn't make a huge difference.

Anyone else have a different perspective on this?

Also, I haven't had my coffee yet this morning, but if we do this for long enough won't there come a time when we won't have ANY losses because we'll have effectively bought everything at the bottom of the market? (This is assuming no ongoing investments going in, just one lump sum that you're using for, say, FIRE.)

Also, I haven't had my coffee yet this morning, but if we do this for long enough won't there come a time when we won't have ANY losses because we'll have effectively bought everything at the bottom of the market?

Yes. As the market goes back up, the tax lots you purchased near the bottom will likely never be in the red again. That's one of the many reasons I think the robo-advisors are a bit overrated: tax loss harvesting is great for funds you invested recently at a higher price. As your stash grows and you have held more of it for a longer time, the fraction that will even be eligible for loss harvesting will decline.

Also, I haven't had my coffee yet this morning, but if we do this for long enough won't there come a time when we won't have ANY losses because we'll have effectively bought everything at the bottom of the market?

Yes. As the market goes back up, the tax lots you purchased near the bottom will likely never be in the red again. That's one of the many reasons I think the robo-advisors are a bit overrated: tax loss harvesting is great for funds you invested recently at a higher price. As your stash grows and you have held more of it for a longer time, the fraction that will even be eligible for loss harvesting will decline.

It's also harder to effectively TLH in a market that sees such crazy volatility. 5%+ swings on intraday prices? Every day for a week? Unless you're doing it with ETFs and can get intraday pricing, the normal 24 hour delay on mutual fund sales/purchases could really mess up your carefully laid plans.

But if you're trading between vanguard etfs in a taxable account without converting to cash along the way? Go crazy.

It's also harder to effectively TLH in a market that sees such crazy volatility. 5%+ swings on intraday prices? Every day for a week? Unless you're doing it with ETFs and can get intraday pricing, the normal 24 hour delay on mutual fund sales/purchases could really mess up your carefully laid plans.

But if you're trading between vanguard etfs in a taxable account without converting to cash along the way? Go crazy.

You shouldn't ever have to convert to cash when moving between Vanguard mutual funds - you just exchange between them (and thereby get same-day pricing for both the purchase and the sale), so the intraday volatility doesn't really affect your ability to TLH. At most, it requires you to wait until close to the close of the trading day to place your transaction order in order to ensure you know with reasonable certainty at what prices you will be exchanging (unless volatility really gets crazy and prices swings wildly in the last few minutes of the trading day).

With Vanguard mutual funds, I get the current day's close up until 3:59 pm, even on new purchases from my checking account (used to only get it on exchanges). I miss the intraday lows, but can pretty reliably know what I am paying the last few minutes before the close of business.

With Vanguard mutual funds, I get the current day's close up until 3:59 pm, even on new purchases from my checking account (used to only get it on exchanges). I miss the intraday lows, but can pretty reliably know what I am paying the last few minutes before the close of business.

You're both right, of course. Which is why I said go crazy iff you're exchanging vanguard funds in your taxable account. At 3:45 pm eastern time on weekdays to get end of day pricing.

My investing life isn't so tidy. Most investments are in tax shelters. Everything is automated, so tax loss harvesting would also require me to put a stop on auto investments for 31 days. I don't always deal with my finances on weekday afternoons.

I'm not saying tax loss harvesting is a bad thing, just that it's more complicated than has generally been acknowledged here.

Reading up about TLH and auto magic investing... I see buying within an IRA after TLH can create a wash sale from a taxable account, but what about tax deferred? If we have auto investments going into 403/457 every month, would buying similar funds create a wash sale?

I'm thinking of dumping VTIAX, BRK, KO all with short term losses and buying into VTSAX for 30 days.

Also if we're deferring essential 80k to IRAs and Pretax... does TLH come out of 25% marginal rate or 10% marginal from AGI?

You're both right, of course. Which is why I said go crazy iff you're exchanging vanguard funds in your taxable account. At 3:45 pm eastern time on weekdays to get end of day pricing.

Ah, I thought you were trying to distinguish between ETFs (where intraday pricing is available) and mutual funds (where it isn't).

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My investing life isn't so tidy. Most investments are in tax shelters. Everything is automated, so tax loss harvesting would also require me to put a stop on auto investments for 31 days. I don't always deal with my finances on weekday afternoons.

I'm not saying tax loss harvesting is a bad thing, just that it's more complicated than has generally been acknowledged here.

Same here. Investments in tax sheltered accounts don't really affect anything (since TLH isn't available for those investments anyway), except that you have to be careful to avoid triggering wash sale rules by virtue of transactions going on in those accounts too. But auto-investments are what really make TLH a major pain in the ass for me. I would only engage in TLH when market movements are major enough to enable me to deduct at least several thousand dollars (and thereby save at least several hundred dollars) in a single tax year; otherwise I don't bother.

Maybe in retirement I'll have more time to play with the details, but thus far in my investing life the only times I've done tax loss harvesting were when I was liquidating taxable accounts anyway, and sold some lots at a loss to offset other lots with gains.

And even then it was a huge pain trying to keep track of short term vs long term gains/losses, because they offset each other separately before combining for a net figure, and are subject to different tax rates and thus different amounts of tax benefit. The whole thing left an unpleasant taste in my mouth.

For many of us, TLH will lose most of its value in retirement, when our tax liability becomes small or nonexistent (though it could still be useful for artificially lowering reported income for purposes of various financial gymnastics/shenanigans not directly tied to reducing current tax liability).

Miles, does betterment allow you to forbid them to use specific classes of funds? I'd consider letting them handle my taxable funds if they wouldn't create wash sale conflicts with my Roth IRA or TSP funds.

I just did an sell-off of my biggest loser (FSIVX) and converted to FSGDX. I converted a bunch of FSGDX to FSIVX earlier on to decrease fees but I think the amount I'd be able to TLH from this is good. Only thing that I got warned of is the "roundtrip" thing as well as a 1% fee for shares sold that are held less than 90 days (but I think this one is a warning for if I were to sell the FSGDX within the 90 days)